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In the FT, economist Martin Wolf observes that the US – both the most important high-income economy and much the most unequal – is providing a test bed for the economic impact of inequality. The results are worrying. This realisation has now spread to institutions that would not normally be accused of socialism. A report written by the chief US economist of Standard & Poor’s, and another from Morgan Stanley, agree that inequality is not only rising but having damaging effects on the US economy.
Wolf asks: “When should growing inequality concern us? This is a moral and political question. It is also an economic one. It is increasingly recognised that, beyond a certain point, inequality will be a source of significant economic ills.
“According to the Federal Reserve, the upper 3% of the income distribution received 30.5% of total incomes in 2013. The next 7% received just 16.8%. This left barely over half of total incomes to the remaining 90%t. The upper 3% was also the only group to have enjoyed a rising share in incomes since the early 1990s. Since 2010, median family incomes fell, while the mean rose. Inequality keeps rising. The Morgan Stanley study lists among causes of the rise in inequality: the growing proportion of poorly paid and insecure low-skilled jobs; the rising wage premium for educated people; and the fact that tax and spending policies are less redistributive than they used to be a few decades ago”.
In March, an FT article by Edward Luce (America’s democracy is fit for the 1%) was subtitled ‘Both US parties are up for rent, and patriots of all stripes should be troubled’. He correctly forecast that the US Supreme Court would remove what remains of post-Watergate limits on campaign finance. In April it did so. He commented that “in a less unequal society, the downside would be limited. But in an economy where the top 1% of the population owns more than a third of national wealth, it corrodes the republic from which such riches sprung. People fret about America’s 1% economy. They should worry more about its 1% democracy.
Both ends of the spectrum should be concerned about the rising US oligarchy. Last week several Republican presidential hopefuls trekked to Las Vegas to pay their respects to Sheldon Adelson, the gaming billionaire, who owns casinos in Nevada, Macau and Singapore . . .
Wolf continues “The transmission of educational disadvantages across the generations is also a growing handicap to the economy. A debt-addicted economy with stagnant levels of education is likely to fare ill in future . . .
“American education has also deteriorated. It is the only high-income country whose 25-34 year olds are no better educated than its 55-64 year olds. This is partly because other countries have caught up on the US, which pioneered mass college education. It is also because children from poor backgrounds are handicapped in completing college . . .
“This is not just a problem for those whose talents are not fulfilled. The failure to raise educational standards is also likely to impair the economy’s longer-term success. Some of the returns to education may just be the reward to obtaining a positional good: the educated do better because they have won a zero-sum race. Yet a better educated population would also raise everybody to a higher level of prosperity.
“The costs to society of rising inequality go further. To my mind, the greatest costs are the erosion of the republican ideal of shared citizenship. As the US Supreme Court seeks to bend the constitution to the will of plutocrats, the peril is to the politically egalitarian premises of the republic. Enormous divergences in wealth and power have hollowed out republics before now. They could well do so in our age”.
Ed: and this analysis ‘writ small” applies to England.
Posted in Conflict of interest, Corporate political nexus, Democracy undermined, Finance, Government, Lobbying, Parliamentary failure, Party funding, Public relations, Revolving door, Secret State, Vested interests
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New World: After Watergate campaign finance laws were passed to cut out corruption
Now, Justice Clarence Thomas, formerly employed by Monsanto, voted with the majority as the US Supreme Court struck down a cap on political donations, on the grounds that this is a restriction on free speech. Under the new rules, a single individual may now spend $3.6m per election on candidates, their parties’ committees and various political committees.
Justice Thomas also delivered a separate opinion saying all such limits on donations should go.
As Richard McGregor in Washington writes in the FT, overnight this has handed greater power to wealthy political patrons.
Environment secretary Owen Paterson has actively promoted the introduction of GM technology, despite public opposition in Britain and the fact that 50 countries around the world, including Australia, Japan and most countries in Europe have either banned GM crop production outright, or put in place tight restrictions on the production and use of GM products.
The Monsanto connection will be continuing to work hard behind the scenes for an outright Conservative victory in Britain, funding an army of lobbyists and PR firms; an overall majority would allow them to introduce GM crops.